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REGISTERED NUMBER: 07068266 (England and Wales)






















Strategic Report, Report of the Directors and

Financial Statements

for the Year Ended 31 December 2022

for

LiuGong Machinery (UK) Limited

LiuGong Machinery (UK) Limited (Registered number: 07068266)






Contents of the Financial Statements
for the year ended 31 December 2022




Page


Company Information 1

Strategic Report 2

Report of the Directors 3

Report of the Independent Auditors 4

Income Statement 6

Balance Sheet 7

Statement of Changes in Equity 8

Cash Flow Statement 9

Notes to the Cash Flow Statement 10

Notes to the Financial Statements 11


LiuGong Machinery (UK) Limited

Company Information
for the year ended 31 December 2022







DIRECTORS: H C Dale
K S Skalna-Kadziela
S Yuan
G Luo
C P Coulman
D L Thornewell





REGISTERED OFFICE: 3 Bolde Close
Portsmouth
Hampshire
PO3 5RD





REGISTERED NUMBER: 07068266 (England and Wales)





AUDITORS: Bennett Brooks & Co Limited
Chartered Accountants
& Statutory Auditors
St George's Court
Winnington Avenue
Northwich
Cheshire
CW8 4EE

LiuGong Machinery (UK) Limited (Registered number: 07068266)

Strategic Report
for the year ended 31 December 2022

The directors present the strategic report for the year ended 31 December 2022.

REVIEW OF BUSINESS
The principal activity of the Company is the selling of the LiuGong range of construction equipment, spare parts and servicing.

With the UK directors having over 50 years in the business of selling construction plant and machinery, it stood the company in good stead with their knowledge of construction equipment, the market and customers.

PRINCIPAL RISKS AND UNCERTAINTIES
LiuGong Machinery (UK) Ltd, as a 100% owned subsidiary, can take advantage of being supported by the wider LiuGong corporation. The identification of strategic, operational, compliance and financial risks is a key part of the work of the directors and senior staff.

As the UK construction sectors continues its steady Covid 19 recovery, there are everyday risks such as changes in key personnel, competitor threats, exchange rate fluctuations, interest rates, high energy prices, components shortages and arrivals by sea freight taken longer than expected.

LiuGong Machinery (UK) Ltd is principally supplied by the LiuGong Group of companies and any price increases are agreed for a year ahead, which allows the UK operation to structure its price book for its customers over the same timescale.

The company's cash flow is always considered a principal risk to the business, and this is closely monitored by the directors and reported regularly to head office.

In 2022, growth continued into the UK construction market with the introduction of new products, despite major global factors such as the war in Ukraine. Liugong exhibited at the Hillhead quarry exhibition, which attracted new customers to the brand, and larger key account customers came on-board.

In 2023, we have introduced further new products to enhance our product offering, including electric machines, and have continued to attract more key account customers. The biggest challenge the industry faces is the prolonged high interest rates, making consumers sit and wait until the rates improve. Housing & demolition sectors have declined, as customer confidence dropped, leading to a reduction in construction equipment sales in the second half of 2023.

KEY PERFORMANCE INDICATORS
The key performance indicators are turnover and profit and these are reflected in the results below:

The turnover for the 12 months was £33,431,597 (2021: £25,064,636).

The loss for the 12 months before tax was £3,265,803 (2021: £454,308).

OTHER INFORMATION AND EXPLANATIONS
We have opened a Liugong R&D centre in Manchester for UK and Europe, to test and demonstrate the product here in the European work environment. The new F series machines were launched in the UK, proving a huge success to our customers. A new head office & parts warehouse has opened in Q4 2023.
Looking ahead, the prospects in 2024 are considered positive.

The company has no direct competitors selling LiuGong products as they are the sole UK subsidiary.

ON BEHALF OF THE BOARD:





C P Coulman - Director


20 March 2024

LiuGong Machinery (UK) Limited (Registered number: 07068266)

Report of the Directors
for the year ended 31 December 2022

The directors present their report with the financial statements of the company for the year ended 31 December 2022. The comparative information is for the 12 month period from 1 January 2021 to 31 December 2021.

DIVIDENDS
No dividends will be distributed for the year ended 31 December 2022.

DIRECTORS
The directors shown below have held office during the whole of the period from 1 January 2022 to the date of this report.

H C Dale
K S Skalna-Kadziela
S Yuan
G Luo

Other changes in directors holding office are as follows:

B L Prescott - resigned 31 December 2022
G I McGregor - resigned 14 October 2022

C P Coulman and D L Thornewell were appointed as directors after 31 December 2022 but prior to the date of this report.

S J Ford ceased to be a director after 31 December 2022 but prior to the date of this report.

STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the Strategic Report, the Report of the Directors and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

-select suitable accounting policies and then apply them consistently;
-make judgements and accounting estimates that are reasonable and prudent;
-prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS
So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the company's auditors are unaware, and each director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the company's auditors are aware of that information.

AUDITORS
The auditors, Bennett Brooks & Co Limited, will be proposed for re-appointment at the forthcoming Annual General Meeting.

ON BEHALF OF THE BOARD:





C P Coulman - Director


20 March 2024

Report of the Independent Auditors to the Members of
LiuGong Machinery (UK) Limited

Opinion
We have audited the financial statements of LiuGong Machinery (UK) Limited (the 'company') for the year ended 31 December 2022 which comprise the Income Statement, Other Comprehensive Income, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement and Notes to the Cash Flow Statement, Notes to the Financial Statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:
-give a true and fair view of the state of the company's affairs as at 31 December 2022 and of its loss for the year then ended;
-have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
-have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information
The directors are responsible for the other information. The other information comprises the information in the Strategic Report and the Report of the Directors, but does not include the financial statements and our Report of the Auditors thereon.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
- the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and
- the Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Report of the Directors.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
- adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
- the financial statements are not in agreement with the accounting records and returns; or
- certain disclosures of directors' remuneration specified by law are not made; or
- we have not received all the information and explanations we require for our audit.

Report of the Independent Auditors to the Members of
LiuGong Machinery (UK) Limited


Responsibilities of directors
As explained more fully in the Statement of Directors' Responsibilities set out on page three, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditors' responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a Report of the Auditors that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Based on our understanding of the company and industry, we identified that the principal risks of non-compliance with laws and regulations related to UK tax legislation and regulations which govern the preparation of financial statements, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the financial statements such as the Companies Act 2006. We evaluated management's incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal entries to increase revenue, through management bias in manipulation of accounting estimates or accounting for significant transactions outside the normal course of business. Audit procedures performed included:

- Enquiry of management around actual and potential litigation and claims and instances of non-compliance with laws and regulations;
- Auditing the risk of management override of controls, through testing journal entries and other adjustments for appropriateness, testing accounting estimates (because of the risk of management bias), and evaluating the business rationale of significant transactions outside the normal course of business; and
- Reviewing financial statement disclosures and agreeing to supporting documentation to assess compliance with applicable laws and regulations.

There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors.

Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in a Report of the Auditors and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.




Jason Leach FCA (Senior Statutory Auditor)
for and on behalf of Bennett Brooks & Co Limited
Chartered Accountants
& Statutory Auditors
St George's Court
Winnington Avenue
Northwich
Cheshire
CW8 4EE

20 March 2024

LiuGong Machinery (UK) Limited (Registered number: 07068266)

Income Statement
for the year ended 31 December 2022

2022 2021
Notes £ £

TURNOVER 4 33,431,597 25,064,636

Cost of sales (31,536,949 ) (21,367,384 )
GROSS PROFIT 1,894,648 3,697,252

Administrative expenses (5,143,260 ) (4,128,138 )
(3,248,612 ) (430,886 )

Other operating income 31,470 17,627
OPERATING LOSS 6 (3,217,142 ) (413,259 )


Interest payable and similar expenses 7 (48,661 ) (41,049 )
LOSS BEFORE TAXATION (3,265,803 ) (454,308 )

Tax on loss 8 157,872 287,638
LOSS FOR THE FINANCIAL YEAR (3,107,931 ) (166,670 )

LiuGong Machinery (UK) Limited (Registered number: 07068266)

Balance Sheet
31 December 2022

2022 2021
Notes £ £
FIXED ASSETS
Tangible assets 9 2,542,287 3,045,259

CURRENT ASSETS
Stocks 10 15,863,330 11,367,711
Debtors 11 8,521,282 4,858,603
Cash at bank 25,128 5
24,409,740 16,226,319
CREDITORS
Amounts falling due within one year 12 (25,513,932 ) (14,843,123 )
NET CURRENT (LIABILITIES)/ASSETS (1,104,192 ) 1,383,196
TOTAL ASSETS LESS CURRENT
LIABILITIES

1,438,095

4,428,455

PROVISIONS FOR LIABILITIES 16 (594,654 ) (477,083 )
NET ASSETS 843,441 3,951,372

CAPITAL AND RESERVES
Called up share capital 17 597 597
Share premium 5,932,370 5,932,370
Retained earnings (5,089,526 ) (1,981,595 )
SHAREHOLDERS' FUNDS 843,441 3,951,372

The financial statements were approved by the Board of Directors and authorised for issue on 20 March 2024 and were signed on its behalf by:





C P Coulman - Director


LiuGong Machinery (UK) Limited (Registered number: 07068266)

Statement of Changes in Equity
for the year ended 31 December 2022

Called up
share Retained Share Total
capital earnings premium equity
£ £ £ £
Balance at 1 January 2021 597 (1,814,925 ) 5,932,370 4,118,042

Changes in equity
Deficit for the year - (166,670 ) - (166,670 )
Total comprehensive income - (166,670 ) - (166,670 )
Balance at 31 December 2021 597 (1,981,595 ) 5,932,370 3,951,372

Changes in equity
Deficit for the year - (3,107,931 ) - (3,107,931 )
Total comprehensive income - (3,107,931 ) - (3,107,931 )
Balance at 31 December 2022 597 (5,089,526 ) 5,932,370 843,441

LiuGong Machinery (UK) Limited (Registered number: 07068266)

Cash Flow Statement
for the year ended 31 December 2022

2022 2021
Notes £ £
Cash flows from operating activities
Cash generated from operations 1 188,484 (376,464 )
Interest paid (48,661 ) (41,049 )
Tax paid 14,854 -
Net cash from operating activities 154,677 (417,513 )

Cash flows from investing activities
Purchase of tangible fixed assets (370,103 ) (1,175,364 )
Sale of tangible fixed assets 77,032 476,161
Net cash from investing activities (293,071 ) (699,203 )

Decrease in cash and cash equivalents (138,394 ) (1,116,716 )
Cash and cash equivalents at beginning of year 2 (3,636,681 ) (2,519,965 )

Cash and cash equivalents at end of year 2 (3,775,075 ) (3,636,681 )

LiuGong Machinery (UK) Limited (Registered number: 07068266)

Notes to the Cash Flow Statement
for the year ended 31 December 2022

1. RECONCILIATION OF LOSS BEFORE TAXATION TO CASH GENERATED FROM OPERATIONS
2022 2021
£ £
Loss before taxation (3,265,803 ) (454,308 )
Depreciation charges 463,510 379,393
Profit on disposal of fixed assets (14,979 ) (67,302 )
Increase/(decrease) in provisions 260,589 150,197
Impairment of fixed assets 347,512 -
Finance costs 48,661 41,049
(2,160,510 ) 49,029
(Increase)/decrease in stocks (4,495,619 ) 955,865
Increase in trade and other debtors (3,662,679 ) (1,140,611 )
Increase/(decrease) in trade and other creditors 10,507,292 (240,747 )
Cash generated from operations 188,484 (376,464 )

2. CASH AND CASH EQUIVALENTS

The amounts disclosed on the Cash Flow Statement in respect of cash and cash equivalents are in respect of these Balance Sheet amounts:

Year ended 31 December 2022
31.12.22 1.1.22
£ £
Cash and cash equivalents 25,128 5
Bank overdrafts (3,800,203 ) (3,636,686 )
(3,775,075 ) (3,636,681 )
Year ended 31 December 2021
31.12.21 1.1.21
£ £
Cash and cash equivalents 5 54,342
Bank overdrafts (3,636,686 ) (2,574,307 )
(3,636,681 ) (2,519,965 )


3. ANALYSIS OF CHANGES IN NET DEBT

At 1.1.22 Cash flow At 31.12.22
£ £ £
Net cash
Cash at bank 5 25,123 25,128
Bank overdrafts (3,636,686 ) (163,517 ) (3,800,203 )
(3,636,681 ) (138,394 ) (3,775,075 )
Total (3,636,681 ) (138,394 ) (3,775,075 )

LiuGong Machinery (UK) Limited (Registered number: 07068266)

Notes to the Financial Statements
for the year ended 31 December 2022

1. STATUTORY INFORMATION

LiuGong Machinery (UK) Limited is a private company, limited by shares , registered in England and Wales. The company's registered number and registered office address can be found on the Company Information page.

The presentation currency of the financial statements is the Pound Sterling (£).


2. ACCOUNTING POLICIES

Basis of preparing the financial statements
These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and the Companies Act 2006. The financial statements have been prepared under the historical cost convention.

Going Concern
At the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources, through reliance on the external bank financing and written support of the group companies, to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

Turnover
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.

When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Revenue from the hiring out of machines is recognised when a performance obligation of the contract is satisfied. Performance obligations are contracted to be the availability of the machine for specific period of time, typically per calendar month.

Revenue for the service and repairs of machines is recognised when the contract is complete, meets the quality standards regulating the profession have been met and the significant risk and rewards associated have been duly transferred to the customer.

Tangible fixed assets
Tangible fixed assets are initially measured at cost and subsequently measured at cost, net of depreciation and any impairment losses. Cost includes the original purchase price of the asset and the cost attributable to bringing the asset to its working condition for its intended use.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Freehold Land and BuildingsStraight line over 89 years
Improvements to leasehold propertyStraight line over 5 years
Plant and machineryStraight line over 12 years
Plant and machinery - Equipment for hireStraight line over 3-5 years
Fixtures and fittingsStraight line over 5-10 years
Computer equipmentStraight line over 5 years
Motor vehiclesStraight line over 8 years

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.

LiuGong Machinery (UK) Limited (Registered number: 07068266)

Notes to the Financial Statements - continued
for the year ended 31 December 2022

2. ACCOUNTING POLICIES - continued

Stocks
Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and that have been incurred in bringing the stocks to their present location and condition.

Used machines which are part-exchanged upon the sale of new machines are written down to their stock-in value (SIV) before being recognised as stock. The difference between part-exchange value and the SIV is treated as an additional selling cost of the new machine sold and is recognised in accordance with the revenue recognition policy. The SIV is based on the directors' experience of the market and is therefore a critical judgement.

At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.

Foreign exchange
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

Leases
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease s asset are consumed.

Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

Impairment of fixed assets
At each reporting period end date, the company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

LiuGong Machinery (UK) Limited (Registered number: 07068266)

Notes to the Financial Statements - continued
for the year ended 31 December 2022

2. ACCOUNTING POLICIES - continued

Cash and cash equivalents
Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

Financial Instruments
The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Other financial assets
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.

Impairment of financial assets
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

Classification of financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

Basic financial liabilities
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.


LiuGong Machinery (UK) Limited (Registered number: 07068266)

Notes to the Financial Statements - continued
for the year ended 31 December 2022

2. ACCOUNTING POLICIES - continued
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Other financial liabilities
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.

Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

Equity Instruments
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.

Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

Employee Benefits
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

Share premium
The share premium accounts reflects the difference between the nominal value of shares issued and the fair value of shares.

LiuGong Machinery (UK) Limited (Registered number: 07068266)

Notes to the Financial Statements - continued
for the year ended 31 December 2022

3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

Critical judgements
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.

Depreciation rates
The Directors estimate the useful economic lives of their tangible fixed assets, and these are reviewed and updated annually. This also requires the use of judgement.

Key sources of estimation uncertainty
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.

Warranty provision
Where machines are sold with a warranty, a provision for the estimated claim that could arise on that warranty is calculated. All reclaimable costs incurred up to the period end were recharged to group in the current period. The estimation is based upon available future claims information and experience, the level of costs reclaimed from group companies and as it is an estimate, the assumptions used may prove over time to be inaccurate. The total warranty provision at 31 December 2022 was £410,786 (2021: £150,197).

Stock in value
Used machines which are part-exchanged upon the sale of new machines are written down to their stock in value (SIV) before being recognised as stock. The difference between part-exchange value and the SIV is treated as an additional selling cost of the new machine sold and is recognised in accordance with the revenue recognition policy. The SIV requires the use of judgement and is based on the directors' experience of the market.

Net Realisable Value of stock
The net realisable values (NRV) of used machines are assessed by the directors and based on the directors' experience of the market. Any write down in value is charged to the Income Statement. The valuations require the use of judgement and are based upon the directors' knowledge of market conditions are the time.

4. TURNOVER

The turnover and loss before taxation are attributable to the one principal activity of the company.

An analysis of turnover by class of business is given below:

2022 2021
£ £
Sales of machines 31,631,255 23,490,322
Sales of parts 789,802 573,101
Servicing and repairs 835,870 677,957
Hire of machines 151,841 305,618
Carriage 22,829 17,638
33,431,597 25,064,636

LiuGong Machinery (UK) Limited (Registered number: 07068266)

Notes to the Financial Statements - continued
for the year ended 31 December 2022

4. TURNOVER - continued

An analysis of turnover by geographical market is given below:

2022 2021
£ £
United Kingdom 33,431,597 23,310,984
Europe - 857,605
Rest of the World - 896,047
33,431,597 25,064,636

5. EMPLOYEES AND DIRECTORS
2022 2021
£ £
Wages and salaries 2,290,564 2,120,277
Social security costs 306,645 249,437
Other pension costs 48,375 65,873
2,645,584 2,435,587

The average number of employees during the year was as follows:
2022 2021

Directors 3 3
Direct staff 45 28
Administration staff 8 22
56 53

2022 2021
£ £
Directors' remuneration 357,397 234,400
Directors' pension contributions to money purchase schemes 2,422 2,638

The number of directors to whom retirement benefits were accruing was as follows:

Money purchase schemes 2 2

Information regarding the highest paid director is as follows:
2022 2021
£ £
Emoluments etc 141,690 82,200
Pension contributions to money purchase schemes - 1,319

LiuGong Machinery (UK) Limited (Registered number: 07068266)

Notes to the Financial Statements - continued
for the year ended 31 December 2022

6. OPERATING LOSS

The operating loss is stated after charging/(crediting):

2022 2021
£ £
Hire of plant & machinery 19,624 15,878
Depreciation - owned assets 463,510 379,395
Profit on disposal of fixed assets (14,979 ) (67,302 )
Audit fees 22,500 21,018
Auditors' remuneration for non audit work 3,931 3,825
Foreign exchange differences 35,848 (154,643 )
Cost of stocks recognised as an expense 28,567,205 19,390,128
Impairment of stocks 2,909,094 3,247,805
Operating lease charges 558,145 548,301
Impairment of fixed assets 347,512 -

7. INTEREST PAYABLE AND SIMILAR EXPENSES
2022 2021
£ £
Bank interest on loans and
overdrafts 48,661 41,049
48,661 41,049

8. TAXATION

Analysis of the tax credit
The tax credit on the loss for the year was as follows:
2022 2021
£ £
Current tax:
Overprovision in prior year (14,854 ) -

Deferred tax:
Deferred tax (143,018 ) (82,355 )
Prior year deferred tax - (47,553 )
Effect of changes in tax rate - (157,730 )
Total deferred tax (143,018 ) (287,638 )
Tax on loss (157,872 ) (287,638 )

UK corporation tax has been charged at 19% (2021 - 19%).

LiuGong Machinery (UK) Limited (Registered number: 07068266)

Notes to the Financial Statements - continued
for the year ended 31 December 2022

8. TAXATION - continued

Reconciliation of total tax credit included in profit and loss
The tax assessed for the year is higher than the standard rate of corporation tax in the UK. The difference is explained below:

2022 2021
£ £
Loss before tax (3,265,803 ) (454,308 )
Loss multiplied by the standard rate of corporation tax in the UK of 19% (2021 -
19%)

(620,503

)

(86,319

)

Effects of:
Expenses not deductible for tax purposes 3,300 10,907
Income not taxable for tax purposes - (6,943 )
Depreciation in excess of capital allowances 4,039 -
Adjustments to tax charge in respect of previous periods (14,854 ) -
Unrecognised deferred tax asset 470,146 -
Prior year deferred tax - (47,553 )
Tax rate changes - (157,730 )
Total tax credit (157,872 ) (287,638 )

FACTORS THAT MAY EFFECT FUTURE CHARGES

In the Spring Budget 2021, the Government announced an increase in the corporation tax rate from 19% to 25% from 1 April 2023. This rate change was substantively enacted on 24 May 2021. In the Autumn Statement in November 2022, the government confirmed the increase in corporation tax rate to 25% from April 2023 and the deferred tax balances have been recognised at 25%.

9. TANGIBLE FIXED ASSETS
Freehold
Land and Improvements Plant and
Buildings to property machinery
£ £ £
COST
At 1 January 2022 1,268,461 154,539 1,727,735
Additions - - 296,519
Disposals - - (108,820 )
At 31 December 2022 1,268,461 154,539 1,915,434
DEPRECIATION
At 1 January 2022 32,334 59,605 411,598
Charge for year 14,458 29,711 355,085
Eliminated on disposal - - (47,033 )
Impairments - - 347,512
At 31 December 2022 46,792 89,316 1,067,162
NET BOOK VALUE
At 31 December 2022 1,221,669 65,223 848,272
At 31 December 2021 1,236,127 94,934 1,316,137

LiuGong Machinery (UK) Limited (Registered number: 07068266)

Notes to the Financial Statements - continued
for the year ended 31 December 2022

9. TANGIBLE FIXED ASSETS - continued

Fixtures
and Motor Computer
fittings vehicles equipment Totals
£ £ £ £
COST
At 1 January 2022 314,317 134,837 169,779 3,769,668
Additions - 41,987 31,597 370,103
Disposals - - (266 ) (109,086 )
At 31 December 2022 314,317 176,824 201,110 4,030,685
DEPRECIATION
At 1 January 2022 126,458 38,109 56,305 724,409
Charge for year 23,960 18,933 21,363 463,510
Eliminated on disposal - - - (47,033 )
Impairments - - - 347,512
At 31 December 2022 150,418 57,042 77,668 1,488,398
NET BOOK VALUE
At 31 December 2022 163,899 119,782 123,442 2,542,287
At 31 December 2021 187,859 96,728 113,474 3,045,259

Included within Plant & Machinery is equipment available for hire with a cost of £1,459,340 (2021: £1,301,090) and a net book value of £572,596 (2022:£1,035,898).

10. STOCKS
2022 2021
£ £
Stocks 15,863,330 11,367,711

20222021
£   £   
New machines11,290,7715,488,901
Used machines1,773,3293,687,927
Parts and work in progress2,799,2302,190,882
15,863,33011,367,711

There is no significant difference between the replacement cost of the inventory and its carrying amount. Inventory is stated after provisions of £3,658,102 (2021: £749,009).

11. DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
2022 2021
£ £
Trade debtors 6,271,106 3,216,333
Other debtors 131,376 207,436
Due from group undertakings 218,667 261,053
Deferred Tax 984,089 984,089
Prepayments & accrued income 916,044 189,692
8,521,282 4,858,603

Amounts due from group undertakings are interest free, unsecured and repayable on demand. Of the above deferred tax balance, £984,089 is expected to reverse in more than one year (2021: £984,089).

LiuGong Machinery (UK) Limited (Registered number: 07068266)

Notes to the Financial Statements - continued
for the year ended 31 December 2022

12. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
2022 2021
£ £
Bank loans and overdrafts (see note 13) 3,800,203 3,636,686
Trade creditors 1,258,850 774,797
Social security & other taxes 99,923 91,032
VAT 339,635 9,588
Other creditors 39,641 37,283
Due to group undertakings 19,020,343 9,401,330
Accruals & deferred income 955,337 892,407
25,513,932 14,843,123

Amounts due to group undertakings are interest free, unsecured and repayable on demand.

13. LOANS

An analysis of the maturity of loans is given below:

2022 2021
£ £
Amounts falling due within one year or on demand:
Bank overdrafts 3,800,203 3,636,686

14. LEASING AGREEMENTS
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

2022 2021
£ £
Within one year 70,106 190,651
Between two and five years 205,129 233,482
In over five year - 45,082
275,235 469,215

15. SECURED DEBTS

The following secured debts are included within creditors:

2022 2021
£ £
Bank overdrafts 3,800,203 3,636,686

On the 22nd October 2020, LiuGong Machinery (UK) Limited entered into an arranged overdraft facility, provided by HSBC UK Bank PLC, with a limit of £6,000,000. The overdraft facility contains a debenture a including a fixed and floating charge over all assets. The floating charge covers all the undertaking of the company and all its property, both present and future. The debenture also contains a negative pledge, meaning the company shall not create or allow any mortgage, charge, pledge, lien or other encumbrance over all or any part of its assets or revenues or uncalled capital except the existing and future security of the bank.

LiuGong Machinery (UK) Limited (Registered number: 07068266)

Notes to the Financial Statements - continued
for the year ended 31 December 2022

16. PROVISIONS FOR LIABILITIES

20222021
£   £   
Deferred tax183,868326,886
Warranty provision410,786150,197
594,654477,083

The provision for deferred tax of £183,868 (2021 - £326,886) relates to accelerated capital allowances, and the deferred tax asset of £984,089 (2021 - £984,089) relates to losses available to carry forward which will be utilised against future profits.

There are unprovided deferred tax assets relating to losses of £2,655,112 (2021: £nil).

17. CALLED UP SHARE CAPITAL

Allotted, issued and fully paid:
Number: Class: Nominal 2022 2021
value: £ £
595 Ordinary A £1 595 595
2 Ordinary B £1 2 2
597 597

All shares have full voting, dividend and capital rights.

18. PENSION COMMITMENTS

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.

Details of the annual charge to the profit and loss account is £48,375 (2021: £65,873). At the year end £22,451 (2021: £9,690) of money purchase contributions were included in other creditors.

19. RELATED PARTY DISCLOSURES

Key Management

The directors of the UK company and considered key management of the company. Their remuneration is disclosed in the directors remuneration section of the accounts.

20. ULTIMATE CONTROLLING PARTY

The company's parent company is Liugong Machinery HongKong Co., Ltd. whose registered office is 23/F, Sing Ho Finance Building, 168 Gloucester Road, Wan Chai Hong Kong.

The company's ultimate parent company is Guangxi Liugong Machinery Co., Ltd. A company registered in China whose registered office is No.1 Liutai Road, Liuzhou, Guangxi, 545007, China. Group accounts can be obtained from this address upon request.

The largest and smallest group of which the company is a member and for which group accounts are drawn up is that of Guangxi Liugong Machinery Co., Ltd.

The ultimate controlling party is Huang Haibo, President of Guangxi Liugong Machinery Co., Ltd.